To ask when interest rates will likely go down?

[AnxietyLevelMax]

We are close to remortgaging for the first time. Long long time ago i was happy and excited thinking we will be paying less by £200 min per month. Right now our rate would change. We still have 5 more months before we can remortgage so we can end up paying even more than now.

how long do u think it will all last?

i dont know how we are going to do that, we cant save anything now because we are paying debts, childcare is expensive as hell, everything is expensive, we barely make it month to month paying debts off but it will still take us 1.5-2 yrs min. We have no financial cushion. I am worried as hell, cant sleep worrying if something happens we dont have any extra money.

I think you should look at a 5% interest rate and see if it is affordable.

Agree that it could go to7% but I think everyone should look at 5% as a basis

I thought interest rates had been forecast to increase? A friend was telling me that in the 80s they went as high as 15%. Can you imagine?

To me it has been astounding that banks have allowed such high borrowing without checking the affordability of repayments of customers at projected higher rates of interest.

After 08 they did tighten up lending though.

I know, but in a discussion about interest rates rising, the variation in rates over time is relevant.

Do you not think house prices are also relevant though?

I don't think some younger people realise how unusual these low rates are in a historical context. I'm worried for a family member who is about to stretch themselves significantly on the mortgage front. It's difficult, many people have no choice in order to get in the housing ladder

If banks think rates will be much higher I can't see why they are offering below 3% 10 yr fixes.

Going back to your original question, OP, is your intention to increase your mortgage and use the additional capital to clear your debts?

If so, I'd say do it, and do it as soon as you can. Card and loan debt will always cost more than mortgage debt, so you'll reduce your outgoings and have more disposable income which will help you cover the rising cost of living. But you need to remember that this only helps if you don't get into more debt!

If you go back to sticking stuff on cards, buying cars on finance etc, it will be futile.

It's be worth speaking to your current lender and seeing if they would let you move to a new fix now. Also check what the penalty would be if you ended your current fix and remortgaged elsewhere. If rates go up by 1% in that 5 months (entirely possible imo), it may be that the savings would outweigh the penalty if you switched early.

This * a million. Rampant speculation, irresponsible lending, and greed has completely screwed over the next generation.

I don’t need to imagine. I was there. If you look at the various graphs people have posted, you can see they were even higher in the 70s. Interest rates now are abnormally low still.

I dont actually know if the bank of england takes them into account when setting interest rates.

So i dont know if tgey are relevant to 'what will interest rates do next'

Prices are relevant to affordability and size of loan and impact of rate increases on these bigger loans all of which affect me as much as anyone else, but i am not sure if the bofe ares about me.

We are paying the same interest now as the 15% times due to the house value difference.
So we are living it.

well, I’m not. I’m one of them stuck renting who could only dream of owning.

I'm worried for a family member who is about to stretch themselves significantly on the mortgage front. It's difficult, many people have no choice in order to get in the housing ladder

So what should they do? Our new house means borrowing more but as we are a bit older we don't have to stretch & have a lower LTV. Renting the same house would be minimum 50% more.

How are they stretching themselves though? The banks are definitely tightening up, mortgage approvals are slipping

It is shit OP.

The UK is so expensive at the moment. Nothing is cheap anymore. Wages aren't increasing either. We are only two people and on what used to be 'decent' wages (I earn 25k, husband earns 65k) yet we are still feeling these price hikes. I can't imagine how families must feel right now.

We seem to be in that unfortunate bracket where you are heavily taxed as well and husband's student loan repayments are extraordinary. It puts me off having kids tbh because of the financial worry. We are OK just now but we were skint in our early 20s, I don't want to go back to that.

Sorry, bit of a derail.

I dont actually know if the bank of england takes them into account when setting interest rates.

I think the BOE takes the economy into account whilst setting rates hence why they did a smaller increase then expected. The housing market is the economy.

Stay on your 5 year fixed.

They did, but it's a reflection of just how little constraints there were on lending in the 00s that even when they tightened up, people were still given mortgages they were clearly going to struggle paying if rates were to increase even a couple of percent.

It's an awful situation we're in, caused by the Tories having deliberately chosen to enact policy that artificially held up house prices. Measures that were enacted in 08-09 as a consequence of a global finacial crisis, that were supposed to be emergency, have been deliberately dragged out for well over a decade. And they created far too much money. To the detriment of the country as a whole, but it maintained and inflated the value of assets held by their core vote so it's all good. And now the consequences of that are being felt, mostly by people who were considered fair game to sacrifice to the cult of high property prices in the first place.

I don't think rates are going to soar, but I do think they're going to increase a bit more and I can see why OP is worried.

I agree with this.

I took out a £36k mortgage on a salary of £17k in 1993.

The salary for that same job (public sector) is now £35-40k, but the market value of that house is now more than 10 times what I paid for it.

House prices have massively outstripped wage growth.

We are paying the same interest now as the 15% times due to the house value difference.
So we are living it.

Exactly

I don't know we had emergency interest rates for so long after 08, they should have increased them earlier. And then the SD pause which again inflated assets.

House prices have massively outstripped wage growth.

This is really important. Inflation in the past lend to strong wage growth but wages haven't gone anywhere & unions are far less powerful these days.

why we had

Yes but the problem is if they put the rate up even higher when we're already paying hundreds of thousands more for houses

My mortgage is £2,000 a month - that would make it £2,300 a month !

And thats why in the 1990s there were large numbers of repossessions. Interest rates rising & house prices falling.

Unfortunately I think a lot of these problems are baked in now, as a consequence of policy choices taken to prop house prices up. Obviously that's going to involve a lot of suffering.

I think people who are young enough to do so may end up extending mortgage terms when they next fix. Obviously that will have a negative knock on effect in itself, people having to commit more of their incomes to housing for a longer period. That money won't be available for the sort of consumer spending that maintains other people's jobs.

The housing market is a relatively small part of the economy though. The BOE also has to take into account the relative value of sterling against other currencies, inflation, growth and employment.

While mortgage rates have a big impact on those who have mortgages, they don't have much of an impact on renters, esp those in social housing, or those who are mortgage free. But inflation does, and a sterling drop affects inflation because we rely so much on imports, esp oil prices. It also affects inward investment.

The BOE has to steer a very tricky course, avoiding the pitfalls of recession caused by high interest rates and a collapse in sterling caused by low interest rates, leading to high inflation.

I wouldn't want to have to make those decisions.

Plus in the past we also had an economy manufacturing wheres now it's largely service. More people servicing high mortgage debt means less money spent on other things.

They need to reign in spending but perhaps it's too difficult with such wealth inequality.